3.

CONCEPTUAL FRAMEWORK

In the realm of financial reporting, the concept of disclosure plays a crucial role in providing
relevant and reliable information to users. Within this framework, there are two distinct types of
disclosure: mandatory and voluntary.

Mandatory disclosures are those that must be included in a company's financial statements as per
the applicable accounting standards or regulatory requirements. These prescribed disclosures
ensure transparency and accountability, allowing stakeholders to make informed decisions.

On the other hand, voluntary disclosures go beyond what is required by regulations or standards.
They are driven by a company's own initiative to provide additional information that may be
useful for users in understanding its financial position, performance, and risks. Voluntary
disclosures can include non-financial information such as sustainability initiatives or
management commentary on future prospects.

Both mandatory and voluntary disclosures serve important purposes within the conceptual
framework of reporting. Mandatory disclosures provide a minimum level of consistency and
comparability among different entities, while voluntary disclosures allow companies to
communicate their unique value propositions and differentiate themselves from competitors.

Ultimately, an effective combination of both types of disclosure ensures a comprehensive report

that meets the needs of various stakeholders while maintaining adherence to accounting
principles. Striking this balance is critical for organizations to build trust with investors,
creditors, and other interested parties who rely on financial information for decision-making
purposes.

In the world of financial reporting, the concept of mandatory and voluntary disclosure plays a
crucial role in ensuring transparency and accountability. The conceptual framework provides
guidance on what information should be disclosed in the actual report.

Mandatory disclosure refers to the information that companies are required by law or accounting
standards to disclose. These disclosures are essential for investors, creditors, and other
stakeholders to make informed decisions about the financial health and performance of a
company. They include items such as financial statements, notes to the financial statements,
management's discussion and analysis (MD&A), and other legally mandated disclosures.

On the other hand, voluntary disclosure goes beyond what is required by law or accounting
standards. It encompasses additional information that companies choose to disclose voluntarily
to provide a more comprehensive picture of their operations, risks, strategies, or sustainability
initiatives. Voluntary disclosures can include non-financial performance metrics, environmental
impact assessments, corporate social responsibility (CSR) reports, or any other relevant
information that companies deem important for stakeholders.